Introduction to the Market
Stocks opened cautiously higher to start the week, but were mixed by the close. This trend is likely to continue throughout the week as investors await clues from the Federal Reserve about potential rate cuts. The release of the minutes from the July Fed meeting and Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium will be closely watched.
Federal Reserve and Rate Cuts
The July jobs report came in much lower than expected, immediately boosting expectations for a quarter-point rate cut at the next Fed meeting in September. Some experts are even calling for a half-point reduction. However, last week’s mixed inflation data slightly lowered the odds, and CME FedWatch shows futures traders are still pricing in an 83% chance the Fed will come through with a 25-basis-point cut.
According to José Torres, senior economist at Interactive Brokers, "The main event for this week may very well shape expectations for the central bank’s path going forward." While some market participants are anticipating up to three rate cuts by year’s end, Torres notes that inflationary pressures could lead to the Fed maintaining its wait-and-see approach.
Retail Earnings
It’s not all about the Fed this week. Major retailers will report earnings, giving us a closer look at consumer spending amid higher tariffs and sticky inflation. Walmart, Home Depot, Lowe’s, and BJ’s Wholesale are some of the highlights on this week’s earnings calendar. UBS Global Research analyst Michael Lasser expects Walmart’s earnings report to show strong underlying momentum and a good position to generate significant margin expansion.
Target’s Earnings and Downgrade
Target will report earnings this week, with the retailer’s second-quarter report due out ahead of Wednesday’s open. Wall Street expects the print to show year-over-year declines on both the top and bottom lines. BofA Securities analyst Robert Ohmes downgraded Target to Underperform from Neutral ahead of earnings, citing increasing longer-term sales and margin risks. Ohmes also noted "increasing competitive threats" from Walmart and Amazon.com.
Novo Nordisk’s FDA Win
In non-earnings news, shares of Novo Nordisk jumped 3.7% after the company’s obesity drug, Wegovy, was granted accelerated approval from the Food and Drug Administration (FDA) to treat adults with metabolic dysfunction-associated steatohepatitis (MASH), a serious liver disease. According to BMO Capital Markets analyst Evan David Seigerman, this approval "could start to help shift the momentum for Novo following a more difficult start to the year."
Market Performance
As for the main indexes, the Dow Jones Industrial Average slipped 0.08% to 44,911, the broader S&P 500 finished fractionally lower at 6,449, and the tech-heavy Nasdaq Composite edged 0.03% higher to 21,629.
Conclusion
In conclusion, this week’s market trends will be shaped by the Federal Reserve’s decisions and the earnings reports from major retailers. Investors will be closely watching the release of the minutes from the July Fed meeting and Federal Reserve Chair Jerome Powell’s speech for clues about potential rate cuts. The retail earnings reports will provide insight into consumer spending, while Novo Nordisk’s FDA win has already shown a positive impact on the company’s stock. As the market continues to navigate these developments, investors should remain cautious and informed.
